Passenger Load Factors

Passenger Fares (Average Yield) Air fares are often regarded as one of the important factors which affects the profitability of the airlines. Consequently, passenger fares or yields vary from seasonality, uniqueness of the route, number of passenger demand and degree of competition from its competitors (Hanlon, 2007). Tesfay (2016) has defined passenger yields as “the mathematical outcome of two additional fundamental metrics: output solds and revenue earned.” In relation to Tesfay’s (2016) definition, it can be simply translated as total passenger revenue divided by the total number of passengers. Moreover, passenger yields are considered to be one of the important factor which determines the airline’s financial performance (Wang, Fan, Fu,

This is evident in the study conducted by Dresner, Eroglu, Hofer, Mendez. and Tan (2015) shows that the entry of Gulf carriers in the United States show a minimal reduction on fares on markets being served by both Gulf carriers and US-based carriers operating routes from United States to Africa, Europe, and even in Asia.

Passenger Load Factor Another important factor that determines the performance of the airline is the passenger load factor. As defined by Saranga and Nagpal (2016), passenger load factor is the measure of the airline’s aircraft capacity utilization. Furthermore, Tesfay (2016) expounded this concept by defining passenger load factor (PLF) as the percentage of airline’s output sold. In Zhang and Round’s perspective (2008), passenger load factor can also be defined as the percentage measure of the airline’s ability to fill in the available seating capacity with passengers.

Figure 2 Formula in deriving

Furthermore, Tesfay (2016) also stressed that load factor measures the airline’s capacity to meet the exisiting passenger demand.

Passenger load factor also plays an important role in the airline planning and operations. Saranga and Nagpal (2016) stressed that load factor is subject to the existing demand in the market. With this concept, airline companies should consider matching the existing market demand to its capacity offering. Barros and Wanke (2015) stress that load factors influence the decision made by airlines in choosing the operating aircraft for a specific route. Consequently, passenger load factor is considered as one important determinant of the airline profitability. It simply assesses the airline’s capability to sell available seats to the market. Moreover, studies also shows that passenger load factor and yields are interrelated with each other. In one of the few studies conducted by Tesfay’s (2016), analysis shows that high load factors are often associated with low passenger yields. Moreover, Tesfay (2016) also explained this concept by